A pricing team adds value in one of four ways: first, often as being the only people in the company who understand marginal costing and contribution analysis, the fundamental techniques needed to evaluate the worth of a product and the profitability of a price; second, by building tools to automate price and proposition analysis, administration and reporting; third with their knowledge of the market: competitors, suppliers, customers, the commercial relationships between them and the prices between them; and fourth, by being the only people with the sheer nerve to make the decisions. If it doesn't do these things, it's really only a pricing admin team, preparing and evaluating quotes from account execs and sending prices and specs for data entry.
There is no market. Banks pretend they are in competition for loans, but they aren't. If you don't have a current account or a mortgage with the bank, they might not quote you at all, or they may give you a silly price. The very act of having them look up your credit rating with Experian or Call Credit actually affects your credit rating – downwards. You can't go shopping for prices: what you see in the window is not what you will pay. The few lenders who don't need you to have a current account only lend to the top end of the credit bracket, so the odds are that's not you. There are no suppliers – the money comes from captive depositors or the money markets via the Treasury function. The customers? We knows everything about them except the things any real marketeer would want to know.
The cost analysis is done for the pricing people. The largest cost is bad debt from people not repaying loans and that is the domain of credit risk. I grant that consumer credit risk is a specialist subject, but it's not that hard and people don't do it that well. All the models are backward-looking. In all the banks. No-one has built a forecasting model. They have had thirty years since I started working and learned to look for relationships between GDP (or inflation or industrial production or average earnings or whatever else was published by National Statistics) and whatever we wanted to model. They haven't looked at using Black-Scholes option-pricing techniques, where there is a huge literature on forecasting. I say this to prove that what banks do is not that sophisticated – tedious maybe, but not sophisticated. The point is, the cost analysis is done elsewhere.
The pricing models have been devised and coded (in Excel – nothing like a sharp, professional look) by a specialist part of the business where dwell all the model-builders and data crunchers who aren't in credit risk. So the pricing team has no internal programming and modelling expertise of its own – except me and neither are on my job description.
It doesn't set prices because it doesn't make decisions. Those are made after endless crunching of huge samples by a group of “senior” managers, and they always ask for more figures or re-assurance. Because making a profit is all very well, but it can't get in the way of sales. Banks are not so sales-driven as sales-obsessed. No, actually, obsessed is mild. Banks have a mania about sales. Compared to banks, Mars, Tesco, Sainsbury or Microsoft think that it's nice you buy their products. Banks want to have both their hands in all your pockets and the only reason they haven't taken more is that that Chancellor of the Exchequer got their first. And all the pricing analysts around me do is report and analyse sales, model the effect of pricing on sales and notionally on the improvement on profitability. They aren't pricing analysts, they are sales analysts.
Finally, I've understood why I just can't get that interested in what they do. No market knowledge, no commitment to developing technical skills, no interest in the outside economy, no decision-making, no modelling and tool-building. Nothing I like doing. Not pricing at all, really.
And then there's the hygenie stuff: the Internet connection is awful, we only get to use M$ Office and VBA, the bullshit piles up so fast you need wings to stay above it, productivity is daily hampered by "risk management" and IT policies dreamed up by people who don't use computers, there's no training and the idea of Cool New Stuff being fun and paying off down the road? The list is a LOT longer than this. Don't even discuss the toilets.
And I've got to pick a job in the new organisation – to show willing. They will put me in the one they want me in anyway – but they are pretending we get to choose (or “preference” as a verb) up to three jobs. Before they tell us we're doing the fourth.
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